Dear CAs: I am running a small contracting business (sole proprietorship) where all my clients so far are based in EU. I would like to setup a business bank account in EU to receive the fees paid by clients, so they can use SEPA to transfer immediately, and I can use Wise for foreign inward remittance to my Indian current bank account. Is it legal to have a foreign business account for this purpose? Thank you.
You can not have just a Business account without setting up business entity in the foreign countries
So you need to set up a branch at EU to open a bank account there and than you can do the transaction as mentioned in the question
Without having business entity you can not open and run business account in any country outside india
In my opinion, you cannot open a business account in a territory without establishing any business in that country and paying taxes there.
So, it will be difficult for you to open a bank account in the EU.
You can open a Paypal account in India and route all your transactions from that account to your Indian business bank account.
I see I have missed some essential details for you to be able to answer: I have been using Paysera.com before from another country. They offer this type of services (there are more services like Paysera in EU, which do not require residence/tax-residence). I am not Indian citizen, but Indian resident, so they will offer me their services. My question is if I can legally use a foreign business account in India for receiving money from clients abroad (in EU). I have been trying to understand the regulations but unable to find the full answer. Thank you again.
Yes you can have foreign bank account if they allow you, however it is advisable to just use payment gateways like paypal or stripe so that amount comes directly in your bank from there.
Yes you can use foreign bank account to get money in India but you need to disclose the income in Indian income tax return and disclose it in your income tax return foreign asset also.
Hope you find the information helpful, if yes do rate if 5 and provide your valuable feedback for my improvement.
Thank you.
As per the RBI Guidelines in india kindly note that you need to receive funds from the bank account of party to whom sales / service invoice is raised
So if in indian books if you are raising invoice in the name of Mr. X of Europe the fund must come from that account only
If any bank is allowing you to open and operate bank account in Europe than you need to raise invoice from indian entity to eu entity of yours and than you can bill to the clients and receipt funds there
- You can open foreign business account if the rules and regulations of such country allows and take consideration from the abroad clients in such foreign account. Generally accounts are opened after completion of KYC norms. There should be some permanent establishment/liasioning office/authorized representative in such country. If you are registered under the GST in India and availing benefit of export of services then you have to check whether you will able to fulfill condition of receiving consideration in convertible foreign exchange. In ITR also you need to mention all details of such foreign bank accounts.
Is Paysera is a payment gateway like Paypal etc. If yes then there is no problem having an account with Paysera.
For detailed discussion, you may opt for phone consultation.
In my opinion, Paysera is presently not taking registration of Indian Citizens. However, you can check whether it takes registration in your case.
If Paysera is a payment gateway and works like Paypal then you can use the same.
Further, if the EU allows for opening a business account without any business presence, you can open the account.
Kindly ensure you transfer all the foreign remittances received in that account to India.
Because, as per your residential tax status, you will have to pay tax on all your income earned during the FY in India.
Further, if you directly receive the payments in Paysera or Paypal, you do not have to worry about any taxes in that country because you will receive them in India.
If the country allows you to open such an account, you can open. However, ensure to remit the funds to India and pay taxes on same. Also disclose the same in your ITR.
Hi
Refer to Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations.
A person resident in India, being an exporter who has undertaken a construction contract or a turnkey project outside India or who is exporting services or engineering goods from India on deferred payment terms may open, hold and maintain a Foreign Currency Account with a bank outside India, provided that -
a) approval as required under the Foreign Exchange Management (Export of goods and services) Regulations, 2000 has been obtained for undertaking the contract/project/export of goods or services, and
b) the terms and conditions stipulated in the letter of approval have been duly complied with
